Please use this identifier to cite or link to this item:
Title: Fundamentally wrong : market pricing of sovereigns and the Greek financial crisis
Authors: Gibson, Heather D.
Hall, Stephen G.
Tavlas, George S.
First Published: 22-Aug-2013
Publisher: Elsevier
Citation: Journal of Macroeconomics, 2014, 39 (Part B), pp. 405-419
Abstract: We investigate the impact of the economic fundamentals, sovereign credit ratings, political uncertainty, and the ECB's Securities Markets Program (SMP) on Greek sovereign spreads. Our findings show that sovereign downgrades and political uncertainty appear to have been drivers of the sharp rises in Greek sovereign spreads from 2008-2009 onwards, over-and-above the impact of the economic fundamentals. Our findings also show that prior to 2008-2009, the markets failed to incorporate Greece's deteriorating fundamentals into the price of Greek sovereigns. We demonstrate that, once markets reassessed their pricing of Greek credit risk, the change in the influence of the fundamentals came swiftly and abruptly, exhibiting overshooting characteristics. The SMP reduced spreads while it was in operation.
DOI Link: 10.1016/j.jmacro.2013.08.006
ISSN: 0164-0704
Version: Post-print
Status: Peer-reviewed
Type: Journal Article
Rights: Copyright © 2013, Elsevier. Deposited with reference to the publisher’s archiving policy available on the SHERPA/RoMEO website.
Appears in Collections:Published Articles, Dept. of Economics

Files in This Item:
File Description SizeFormat 
fundamentally wrong prices upload.pdfPost-review (final submitted)998.88 kBAdobe PDFView/Open

Items in LRA are protected by copyright, with all rights reserved, unless otherwise indicated.